A company needs an analysis to determine whether it should continue to use traditional overhead allocation or activity-based costing. The company uses common machinery to manufacture two simple products. Each year, two production runs for each product require a similar setup effort. Manufacturing overhead includes a setup cost of $50,400 per year. Total overhead for the company, including the setup cost, is $198,000 annually, and direct labor hours are expected to total 18,000 for the year. The following information is available for products A and B: 

 Product A Product B

Units produced 1,000 8,000 Direct material cost per unit $14 $14 Direct labor cost per unit $24 $24 Machine hours per unit 1 1 Direct labor hours per unit 2 2

 

Required: 

a. calculatethe cost per unit for each product using traditional overhead allocation.

 

b. calculate the cost per unit for each product using activity-based costing. Please use direct labor hours for the "Other overhead" allocation pool.

please show calculations

Answer rating: 100% (QA)

a Traditional Overhead Allocation First we need to calculate the total overhead cost per year for ea... View the full answer